So the U.S. Supreme Court says the Affordable Care Act is constitutional. What does this mean for you and your business?
Here are five results of this court decision that are problematic to me:
1. The IRS governs health care?
Apparently so, according to the Supreme Court’s ruling that the individual mandate is constitutional. The rationale for upholding the mandate: the penalty that individuals will have to pay if they don’t have required medical coverage starting in 2014 is merely a tax. And who’s going to collect the tax? The IRS!
While the law prevents any criminal action for those who won’t pay the penalty, who knows how enforcement by the IRS will be actualized. Will the IRS ultimately be able to say what medical treatments will be covered by insurance?
2. There’s a loss of privacy for your tax return
Currently, your personal and business tax returns are subject to strict privacy rules. If IRS employees divulge any information, there are serious consequences. Now, under the Patient Protection and Affordable Care Act, the IRS must tell the “Health Choices Commissioner” and state health programs about taxpayers, including their filing status, modified adjusted gross income, the number of dependents, and “other information as prescribed by” regulations (Secs. 431(a) and 245(b)(2)(A)) of the Patient Protection and Affordable Care Act) (purportedly to verify new tax credits for those who cannot afford to pay health premiums). Also, the Social Security Administration can obtain from the IRS tax data on anyone who may be eligible for the low-income drug subsidy under the Act (Sec. 1801(a) of the Act). In sum, tax information is no longer confined to the IRS; it will be shared with certain other government agencies.
In this environment of increasing identity theft, there has to be concern about more eyes on a tax return.
3. Health care premium costs are not coming down anytime soon
The theory about the personal mandate lowering costs, if I have it correct, is that with more people being brought into the insurance pool, premiums will fall. I haven’t seen any indication of that yet. Of course, the mandate is not set to take effect until 2014, so for now the premiums for self-employed individuals and small businesses are continuing to increase.
4. There are increased tax burdens on many small business owners
Earn $200,000 in salary from your business or self-employment activities as a single person and you will pay an additional 0.9 percent Medicare tax starting in 2013. (The threshold for the tax for married persons filing jointly is $250,000, or $125,000 for those filing separately.) This tax is on top of the basic Medicare tax of 1.45 percent (or 2.9 percent if you’re self-employed) that you already pay, and it’s not deductible.
If you do your payroll in-house, you’ll probably have to start soon to get ready to withhold the additional Medicare tax for employees with wages over the threshold amount.
5. There’s still uncertainty
While the legal challenge is settled, the political challenge has just begun. If there are significant changes resulting from the November election, Obamacare may be repealed with the expectation of replacing it with another health care law. Whether there will be such a political shift, and if so, what, when, and if such new law is enacted, leaves us with uncertainty about tax-related provisions. Are current tax rules to be changed? Will good provisions that have already taken effect, such as coverage for a child up to age 26 on a parent’s medical plan, be retained?
What’s that adage about good intentions and some road? There has to be a better way to bring the cost of medical coverage down and make it available to those who are presently uninsured.
Barbara Weltman is an attorney, author (with such titles as J.K. Lasser’s Small Business Taxes and The Complete Idiot's Guide to Starting a Home-Based Business), and trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® at www.barbaraweltman.com, and host of Build Your Business radio. Follow her on Twitter: @BarbaraWeltman.